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Banks was born in Pittsfield, Massachusetts and grew up on Brown Street, the eldest of four children of Ann (née Wallace) and Mark P. Mitchell.[8] Her father, a Vietnam veteran, was a factory worker for General Electric and her mother worked in a bank.[9] She has said that she grew up "Irish + WASP + Catholic".[10]

Banks changed her name to avoid confusion with actress Elizabeth Mitchell.[16] After auditioning in New York, she was offered a role on the soap opera Santa Barbara. Taking the role would have required her to quit her education at the American Conservatory Theatre, and Banks ultimately decided to forgo the offer due to having taken out student loans to complete her degree.[17] She made her acting debut in the 1998 independent film Surrender Dorothy, as Elizabeth Casey, and appeared in various films over the next seven years including Guy Ritchie's Swept Away[18] before gaining more prominent widespread exposure through the 2005 comedy film The 40-Year-Old Virgin.[19]

In 2006, Banks appeared in the American football drama film Invincible, in which she played Mark Wahlberg's love interest. Later, she and co-star Wahlberg were nominated for the "Best Kiss" award at the MTV Movie Awards.[23] That same year, she landed the starring role in the comedy-horror film Slither.[24]

In 2009, Banks appeared in the horror film The Uninvited, a remake of the Korean film A Tale of Two Sisters.[27] The film was about an intrusive stepmother who makes life miserable for the teen daughters of her new husband. Banks based her character, Rachel, on Rebecca De Mornay's character in The Hand That Rocks the Cradle.[28] "It was very important to me that every line reading I gave could be interpreted two ways," says Banks of her role, "So that when you go back through the movie you can see that".[28]

In 2014, Banks was recognized by Elle Magazine during The Women in Hollywood Awards, honoring women for their outstanding achievements in film, spanning all aspects of the motion picture industry, including acting, directing, and producing.[34]

Banks met her husband, sportswriter and producer Max Handelman,[42] on her first day at college on September 6, 1992. They were married in 2003.[43] She and her husband had their first child, Felix, who was born through a surrogate in March 2011.[44] In November 2012, Banks announced the birth of another son, Magnus Mitchell, also by surrogate.[45]

Banks went through parts of the process of conversion to Judaism, her husband's faith, and studied with rabbis. In 2013, speaking of her religion, she stated that she practices Judaism, though "I did not have my mikveh, so technically I'm not converted", but that she has "been essentially a Jew for like 15 years", adding "Frankly, because I'm already doing everything [practicing religious rituals], I feel like I'm as Jewish as I'm ever going to be".[1][46]

Banks was a vocal supporter of Hillary Clinton's 2016 presidential campaign,[47] involved in a rendition of Rachel Platten's single "Fight Song" with a host of other celebrities at the Democratic National Convention.[48]